Premier Bitcoin exchange Mt. Gox implodes, no help for investors

At the time of writing, one Bitcoin is worth about $500, which is still an extraordinary amount for something that is pseudo currency not backed by a government that you can generate by pressing a button and walking away. However, that $500 value has significantly fallen from its $800 to $1,000 perch on which it stood just a handful of weeks ago. The main culprit in the value decrease is Mt. Gox, the premier Bitcoin exchange, which has been experiencing trouble over the past few weeks. It has now disappeared; a visit to the website will return a blank page.

Though Mt. Gox rose to be the world’s largest Bitcoin exchange, and that very currency rose to popularity through paying for illicit goods and services — drugs, hitmen, unregistered weapons, Domino’s pizza — the exchange was notorious for having a lax approach to security. An unverified document floating around the internet claimed that over 744,000 Bitcoins, or $372,000,000, were missing from the exchange due to theft. Now, visiting the URL returns a blank page. The leaked document stated that the company was insolvent, and considering over a third of a billion dollars were supposedly stolen, that would certainly make paying its debts a difficult endeavor.

Investors in the exchange suggest that the problem is not with the cryptocurrency itself, but simply with the way the exchange was run; this proposes a difficult argument, though. The statement is similar to someone telling you that you disagree with everything, but you can’t disagree with that claim because that only proves it further. Perhaps the reason why the exchange was run poorly was because there isn’t yet an ideal way to regulate, monitor, and trade Bitcoins.

Just two days ago, the Mt. Gox CEO Mark Karpeles stepped down from the Bitcoin Foundation board, and then all tweets were removed from the exchange’s Twitter account. Mt. Gox officials have yet to answer the phone or emails, and Karpeles was not answering the intercom at his apartment, hasn’t tweeted since January 12, and reports state that his mailbox is so stuffed full of mail that it would no longer properly close. Last week, Mt. Gox moved offices due to a security issue. It’s obviously suspicious that over a third of a billion dollars has gone missing, Mt. Gox officials have not been communicating with the public, vacated their office, the Twitter account has been wiped clean, and a document is suggesting Mt. Gox can’t pay back investors.

It remains to be seen how Mt. Gox’s troubles will ultimately affect Bitcoin, as there are plenty of other exchanges, and it’s practically in Bitcoin’s nature to experience astronomical highs and devastating lows. Japan’s authorities have decline to step in and help investors, but that isn’t exactly out of the ordinary considering Bitcoin isn’t considered legal tender. However, this Mt. Gox drama surrounding the cryptocurrency should at least act as a cautionary tale to those currently involved in the scene. Playing with unregulated currency is a dangerous game.